Turkey has announced its economy may grow more than the forecasted five per cent this year, surprising many economists who believed unrest in neighbouring Syria will slow down growth.
Industry Minister Nihat Ergun said foreign direct investment (FDI) in the major emerging economy is expected to exceed $15 billion this year, especially in the country’s real estate sector. FDI amounted to some $15.9 billion last year.
The minister’s comments come in the light of gross domestic product (GDP) figures released on Monday that reveal Turkey’s economy was the fastest growing in Europe last year with a staggering growth rate of 8.5%.
Many analysts predict growth is expected to dip sharply this year, some forecasting well below the IMF’s estimated 2.3% growth rate. Ergun’s forecast far exceeds the government’s medium-term programme growth target of 4%.
“I would not be surprise to see growth above 5% this year,” the minister said in an interview, but admitted that the economy was subject to risks generated by strife in the Middle East.
“The effects of the Middle East turmoil on crude oil prices represent a risk element for the Turkish economy. Parallel to this, we are also affected by any excessive forex volatility,” Ergun said.
Risks and hopes
“Our economy has the dynamism to compensate for these risk factors,” he added while hoping that growth will not negative in the first quarter due to base effects before recovering from the second quarter.
“We have established macroeconomic balances, our financial system is good, we are careful on budget balances, fiscal discipline is being maintained. All this gives investors confidence,” Ergun said.
Ergun said his country is receiving some positive messages from emerging powers such as China, Brazil and India. “There is plentiful liquidity in some places and Turkey has a good potential to turn this into investment,” he said.
Turkish government also announced its aim to produce a fully domestic car brand which has attracted interest from conglomerates like Koc Holding, Fiat, Ford, Renault and Hyundai.
“[Domestic automotive] sector sales have reached 600,000 units. The domestic automotive market could reach one million [units] within five years. The rapidly growing domestic market is one of the reasons for telling the sector: ‘Build a local brand’,” the industry minister said.
According to data released by the country’s Automotive Distributors’ Association, Turkish local passenger and light commercial vehicle sales shrank 17.24% to 64,884 units in March.
Sales fell by 25.39% to 135,753 units in the first quarter of the year, the association said, insisting an economic slowdown is in the making.